Practice Management January 30, 2024

BlackRock Heightens DC-Adviser Focus

Firm announces new resource center, and leader, to work across DC plan and financial advisement.

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BlackRock Inc. is making a further push into the 401(k) market with a new defined contribution practice management program geared toward retirement plan advisement.

The firm announced the launch of its Defined Contribution Practice Management Program on Tuesday, along with the appointment of Carrie Schroen to lead the effort in a newly created post as head of U.S. DC intermediary business. Schroen moves into the role from a prior position as national sales manager for BlackRock’s U.S. wealth advisory team.

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Carrie Schroen

The DC program provides tools and resources for plan advisers “of all sizes,” as the “role of intermediaries is expanding, large national firms are consolidating, and demand for personalized investment solutions is increasing,” BlackRock wrote in its announcement. The New York-based asset manager also noted the “convergence of wealth and defined contribution as a new frontier for the DC Advisor channel.”

Schroen pointed to the firm’s survey that showed participants are looking for more investment advice for their workplace savings, with 56% of respondents noting that they are not confident enough to manage workplace plans themselves.

“We are extremely passionate about closing the access gap for the American worker today, and I know that advisers sit at the epicenter of that opportunity,” she says. “This plan allows them, in one synthesized setting, to address any retiree’s needs today, whether in the workplace or wealth advisement.”

BlackRock also cited Cerulli Associates research that shows 61% of DC advisers want more support in building their business, and 39% want help growing their wealth business.

Growing Need

BlackRock’s program is targeting a growing need for advisement of both qualified retirement plans and the country’s first wave of individual participants who will be retiring almost exclusively on savings from DC plans and Social Security. Schroen notes Cerulli Associates’ findings that DC assets managed by retirement advisers grew by a 14% compound annual growth rate from 2018 to 2022, compared to a 6% CAGR for the overall adviser market.

“We know that the adviser and the work that they do are uniquely positioned to serve American workers,” Schroen says. “We will be positioning ourselves to be a partner to the adviser today, as they exist across all spectrums of retirement.”

BlackRock’s retirement push goes into a space already seeing considerable consolidation among both recordkeepers and aggregators of retirement, wealth advisement and insurance, with many firms growing in both scale and capabilities.

The new DC divisional head says that, rather than competing with these advisory firms, BlackRock is working on deepening relationships and is interested in “co-creating materials and doing bespoke work.”

“We have very close relationships with plan advisers across the country,” Schroen says. “We have taken their direct feedback, and we will continue to do so as we work in partnership to complete and complement any programs they have in place.”

The New York-based firm is the country’s largest DC investment-only asset manager with $1.16 trillion in assets, ahead of the Vanguard Group, according to PLANADVISER’s 2023 DCIO survey.

Tools and Resources

Schroen notes that the DC adviser site’s emphasis is on “agnostic” educational and practice management tools and resources for advisers. The website’s homepage is focused on materials about business development, uncovering prospects and fostering relationships with both plan sponsors and participants.

“These tools are really specific to education around the plan space, rather than product-focused,” she says. “This is about helping the adviser access opportunities with plan sponsors to develop more and more workplace retirement plans, and then also help current participants save more and connect more to their 401(k).”

Schroen points to three main offerings through the DC adviser platform:

  • Resources for plan and financial advisers “wherever they sit on the spectrum of engagement,” whether they have a robust practice and are looking for new ideas, or are just getting into the qualified plan space;
  • Access to “in-field” DC consultants that can be contacted through the site; and
  • Connection to wealth management resources for working with individual savers.

BlackRock’s general adviser center, targeting both DC and financial advisers, includes an investment strategies and products dropdown, pointing to investments that include mutual funds, target-date funds and separately managed accounts.

The pot of money in DC investments, let alone individual retirement accounts, has grown over the past decade. There was $3.77 trillion in DC investments in 2010 and $5.03 trillion in IRAs, according to statistics from the Employee Benefit Research Institute via the Board of Governors of the Federal Reserve System. As of 2022, there was $7.98 trillion in DC assets and $11.95 trillion in IRAs.

What’s changing about the industry today, Schroen says, is the need for more individual management of those assets, noting that personalization “is critical, whether in wealth or the workplace.”

Schroen’s new position was effective January 15, overseeing an “already established” leadership team, according to the announcement.

Anne Ackerley, head of BlackRock’s retirement group, said in a statement with the announcement that: “Through new tools and new leadership, we will help strengthen relationships and position BlackRock as the best partner to our clients.”

Compliance January 29, 2024

Advisers Hardly Ever Recommend Active TDFs to Retirement Plans, Research Shows

A report from Cerulli also found that student loan matching and Roth matching are among the most recommended SECURE 2.0 provisions to plans.

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A survey conducted by Cerulli Associates showed that only 7% of defined contribution plan advisers would recommend an actively managed target-date fund to a retirement plan client, with the consultancy advising asset managers to stress the success of active strategies when touting both blended and actively managed strategies.

The survey also found that that student loan matching and Roth matching contributions were the two provisions from the SECURE 2.0 Act of 2022 that advisers say they are most likely to recommend to a plan.

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TDF Management Style

Researchers at Cerulli asked respondents, “When recommending an off-the-shelf target-date series, which management style is your firm most likely to recommend to a DC plan client?”

To this question, 47% answered “passively managed,” another 47% answered “blended,” and 7% answered “active.” Actively managed funds generally carry higher fees.

Cerulli noted that, “as blended TDFs gain traction and plan sponsors work to fulfill their fiduciary duties, Cerulli recommends asset managers offering blended series highlight their conviction and success metrics in the actively managed strategies offered within these series.”

Separate research from T. Rowe Price issued in 2023 noted that while only 9% of advisers reported using blended TDFs, a much larger 93% were interested in them.

SECURE 2.0 Recommendations

Respondents were asked which two provisions of SECURE 2.0 they were most likely to recommend to a client and which two were in most need of regulatory clarification.

The Cerulli survey found that 54% of advisers were most likely to recommend a plan add a student loan matching feature, and 38% were most likely to recommend a plan permit employer contributions to be made on a Roth basis.

Both policy changes were made by SECURE 2.0. The student loan match permits plans to make retirement contributions that match student loan repayments made by their participants, and the Roth match provision permits a plan to allow participants to receive employer contributions on a post-tax basis.

The two provisions were more popular among the sampled advisers than the saver’s match (25%) and offering a pension-linked emergency savings account (17%). Separate research from the Employee Benefit Research Institute showed these latter two provisions will likely be among the most important provisions of SECURE 2.0.

Student loan and Roth matching were also the two contributions advisers felt were most in need of regulatory clarification: 58% of advisers said plans need government clarification on Roth contributions, and 54% said the same of student loan matching.

In December 2023, the IRS issued a notice which included guidance on Roth contributions. It said participants may only receive employer contributions on a Roth basis if they are fully vested in matching contributions and the contribution is taxable in the year it is deposited in the participant’s account.

There has not yet been regulatory guidance on student loan matching from the IRS or Department of Labor, though the statutory provision became effective on January 1.

Rollovers

The survey also sampled advisers’ opinions about rollovers. Specifically, Cerulli asked advisers why their retirement plan clients opted to retain the assets of former employees as opposed to rolling them over to individual retirement accounts or to the plan of participants’ new employers.

Cerulli found that plans that retained employee assets were motivated by wanting to enhance their retirement offering (35%); their negotiating power with managers (22%); their negotiating power with recordkeepers (22%); their negotiating power with consultants (13%); and by “other”(9%).

Among those that chose to not retain the assets of former employees, Cerulli found those plans were motivated by: an unwillingness to maintain ERISA liability for former employees (57%); increased recordkeeping cost (14%); concern about offering in-plan features for retirees (7%); or “other” (21%).

The recently proposed retirement security rule from the Department of Labor may curb some retirement specialist advisers from recommending a rollover from a DC plan of less than $50,000, the consultancy reported. The proposal, which makes amendments to the prohibited transaction exemption requirements, laid out in PTE 2020-02, would bring one-time rollover advice under the Employee Retirement Income Security Act, increasing regulatory stringency.

“If enacted, Cerulli would not expect this regulation to have a meaningful impact on higher rollover balances if these balances (and clients’ household wealth) make it worthwhile for advisors to take on the added regulatory scrutiny,” Shawn O’Brien, director, retirement, wrote in a statement accompanying the research.

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